Last week the S&P 500 hit a fresh record high (6,147) in the first part of the week. However, that was not to last as valuation concerns fueled a wave of profit taking along with the loss of momentum in some of the biggest year-to-date winners. That induced chatter about the market possibly being at a near-term top, which in turn has curtailed buying interest.
Growth concerns were also in play following Friday’s economic data. The preliminary February S&P Global US Services PMI fell to contraction territory (i.e. below 50), the final University of Michigan Consumer Sentiment report for February dropped to 64.7, and existing home sales declined 4.9% month-over-month in January. Disappointing results from Walmart (WMT) and fallout in shares of UnitedHealth (UNH) following a Wall Street Journal report that the DOJ has launched a civil fraud investigation into UNH’s Medicare Advantage billing practices also contributed to the selling interest in the latter half of the week.
Mega cap stocks and small cap stocks saw the largest decline while the rest of the market held up a bit better. The S&P 500 declined 1.7% from last Friday while the equal-weighted S&P 500 registered a 0.7% decline this week, the Russell 2000 fell 3.7%, and the Vanguard Mega Cap Growth ETF (MGK) logged a 2.7% decline. The weakness in the mega cap space led the S&P 500 consumer discretionary (-4.3%) and communication services (-3.7%) sectors, which house mega cap components, to register the largest declines among the 11 sectors. The defensive-oriented sectors like utilities (+1.4%), consumer staples (+0.9%), and health care (+1.1%) were some of the top performers.